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This calculation is in fact true: but it's also near insane in the point that it makes. I should perhaps point out that I'm rather in favour of the Swedish Pirate Party but that still doesn't make this a valid calculation or point. The claim is that the telecoms companies charge us more per unit of data to send a text message next door than it costs to send a message to Mars.

The telco industry charges more, kilobyte by kilobyte, for sending a text message from your phone to next door than what it costs to send the same message from Mars to Earth.

Hmm, OK, if you say so. How are the numbers done?

The cost of the Mars Global Surveyor probe was roughly 200 million USD for the satellite and launch, plus 20 million per year. So, 400 million USD. It operated for nine years, transmitting at an assumed average of 42,667 bps. Assuming it transmitted 24/7, that comes down to 42,667 × 3,600 × 24 × 365 × 9 / 8 / 1,024 / 1,024 / 1,024 = 1,410 gigabytes of data at a cost of 400 million dollars, or roughly 284,000 US dollars per gigabyte. That number includes the cost of the actual Mars probe and its launch, as well as the cost of the NASA crew handling its journey to Mars for almost a year before it started transmitting.

The charge for sending an SMS text message next door is about 5 USD cents (let’s use the same currency for simpliticy’s sake). Each text message is 140 bytes. This means that there are 1,024 × 1,024 × 1,024 / 140 = 7.67 million text messages per gigabyte. Multiplying this number by 0.05 gives us that the traffic charge when sending an SMS text message next door is 383,000 US dollars per gigabyte.

OK, you're right, they do charge more per unit of data than sending stuff to or from Mars. Fair enough. On to the minor point first, then the major one. Minor:

This is an abysmal failure of free market forces to converge the end price with the cost of production.

Is it? I think there might be something forgotten in that calculation that makes that conclusion suspect. But that's our, coming, major, point, not the minor one:

For there are already next-generation companies who will have the side effect of killing the entire telco industry by providing the same services free of charge. From the Estonian Skype (voice services), via the American Google Fiber (wireline net connectivity), to the Spanish Fon (wireless connectivity), these companies are proven sustainable and can provide the entire telco offering free of charge as a baseline service in a completely viable next-generation business model.

Among us economics types we tend to call those sorts of effects "free market forces". Which are, indeed, pushing the end price closer to the cost of production. Or rather, to be more accurate, the marginal cost to the consumer closer to the marginal cost of production for the producer. For this is the major point, the part that has been forgotten in the main calculation.

Possession of a mobile or cell phone plus an airtime package does not simply allow you to send a text message to one person. As that Mars Global Surveyor system does: you can only talk to that one unit with that $400 million system and it can only talk back to the one base station. A mobile and a connection package allows you to send a text message to any of 2 billion people. Not exactly the right number but that's around and about right for the one third of humanity that are wired up to some form of mobile telephony system.

Which is where the error is. That original calculation is comparing the marginal cost/revenue of sending a text to any one of 2 billion people with the total cost of being able to send the same data packet to Mars. And I'm afraid this is wrong: we should, indeed must, compare either marginal and marginal, or total and total.

To be entirely absurd, to be able to send a text to any of 2 billion satellites would be 2 billion x $400 million ....erm, 800 million billion, or more money than the entire human species has ever had since the beginning of time. To be slightly more sensible I have to admit that I've no idea at all what the airtime providers have spent on rolling out the mobile telephony system over the past three decades. To construct a very dodgy number indeed: the UK is some 60 million of those 2 billion connected. The UK telcos paid £20 billion for spectrum rights alone: that doesn't include R&D, construction, operating costs, that's the cost of spectrum alone. 60 into two thousand is 33, so that gives us a figure of, ooooh, £700 billion among friends just for spectrum rights around the world? Double it for all the other costs? Triple? Shall we say £2 trillion among friends? Yes, an absurd number but we're dealing in orders of magnitude here, that's good enough.

So, the telcos have to make back their £2 trillion because we're talking about the total costs of the entire mobile telecoms system: as we are with our Martian satellite. And £2 trillion compared to 800 million billion looks rather like a bargain really.

Do the telcos make very large gross margins on the texts that we send? Yup, they most assuredly do.

Concluding, how do these numbers translate into actual telco profit markup on text service, to evaluate market efficiency? We recall that the profit markup on data roaming is an unbelievable 1,400,000%, and that a healthy, functioning market can sustain profit markups of 5% to 10% in the face of active competition. Comparing 33 nanocents to 5 cents gives us a mind-boggling telco industry profit markup exceeding 15,000,000,000% – fifteen billion per cent – on sending text messages next door.

But that's not true: because that's the gross profit margin, not the net. And the net has to take account of the fixed costs as well as the marginal ones. And if you go around leaving out your fixed costs when you start to price something you're going to go broke very quickly indeed.

We can do a quick reality check on this as well. Why, some of the airtime providers even make a loss after we include those pesky capital and fixed costs:

Mobile phone giant Vodafone has suffered a half-year loss after being forced to write down the value of its operations in Italy and Spain.

The British company made a loss of £1.98bn, compared with a net profit of £6.68bn a year earlier, caused by fewer calls being made in southern European countries and a competitive UK marketplace.